TOWNSHIP OF CASCO, et al. v. MICHIGAN BOUNDARY COMMISSION

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Petitioners appeal by leave granted a circuit
court order affirming a decision of the State Boundary Commission
(the Commission). We affirm.

I. Issues

This case presents two issues of first
impression. The first is whether the Commission had the
jurisdiction and authority to determine the legal validity of an
Act 425 agreement, 1984 PA 425, MCL 124.21 et seq.; MSA
5.4087(21) et seq. The second is the whether competent,
material, and substantial evidence supported the
Commission’s determination that the Act 425 agreements were
merely a pretext to avoid annexation.

II. Facts

At the time of the proceedings below, the
Winkles owned a parcel of land that was situated in both Casco
and Columbus Townships, and that was in close proximity to the
City of Richmond. The parcel was also near Lenox Township, which
abuts Casco and touches Columbus. In July 1996, the Winkles and
other landowners in Casco and Columbus Townships filed a petition
with the State Boundary Commission seeking to annex approximately
157 acres of land into the City of Richmond, pursuant to the
state boundary commission act, MCL 123.1001 et seq.; MSA
5.2242(1) et seq. According to the Winkles, they wished to
develop their property commercially, and Richmond had the
capacity to provide water, sewer, and other services immediately
and at minimal cost, while the townships would not develop such
capacity for several years. However, in November 1995, Columbus
and Lenox Townships had filed an agreement pursuant to 1984 PA
425, MCL 124.21 et seq.; MSA 5.4087(21) et seq.
(Act 425 agreement), to transfer a portion of Columbus to Lenox.
In January 1996, Casco and Lenox Townships filed a similar
agreement to transfer a portion of Casco to Lenox. These
agreements covered the Winkles’ land.

In November 1997, the Commission concluded that
the two Act 425 agreements did not meet the statutory criteria
and approved the petition for annexation. The townships appealed
to the circuit court, arguing that MCL 124.29; MSA 5.4087(29)
absolutely barred any method of annexation or transfer of land
covered in the Act 425 agreements, and that the Commission lacked
the legal authority to determine the validity of Act 425
agreements in the first place.

Circuit Judge Daniel J. Kelly, in a written
opinion, concluded that the Commission had the authority to
determine the validity of the Act 425 agreements, and that in
this instance the Commission correctly concluded that the
townships entered into the agreements solely to avoid the
city’s annexation, and not for the sake of any development
project that the enabling legislation envisioned. The court
therefore concluded that the Commission’s decision was based
on "competent, material, and substantial evidence on the
whole record," and was not arbitrary, capricious, or an
abuse of discretion. This Court granted the townships’
application for leave to appeal.

The legislative purpose behind the State
Boundary Commission was to establish an independent authority
with "broad powers concerning annexations," and to
allow annexations to take place for the general benefit of the
areas concerned, instead of for the private benefit of
individuals. Township of Owosso v City of Owosso, 385 Mich
587, 590; 189 NW2d 421 (1971). Section 9(2) of the home rule
cities act, 1909 PA 279; MCL 117.9(2); MSA 5.2088[2], provides
that the Commission has the power to determine "the validity
of the petition or resolution" concerning annexation, and
also recognizes the Commission’s duties concerning
"processing and approving, denying, or revising a petition
or resolution for annexation . . . ." MCL
123.1011a; MSA 5.2242(11a), setting forth procedures, provides,
"The commission shall have jurisdiction over petitions or
resolutions for annexation as provided in [MCL 117.9; MSA
5.2088]."

MCL 124.29; MSA 5.4087(29) states that where an
Act 425 agreement "is in effect, another method of
annexation or transfer shall not take place for any portion of an
area transferred under the contract." This section provides
a mechanism through which "local units may conditionally
transfer property" in a manner "controlled by a written
contract agreed to by the affected local units." MCL 124.22;
MSA 5.4087(22). MCL 124.30; MSA 5.4087(30) in turn provides that
a duly filed Act 425 agreement "is prima facie evidence of
the conditional transfer." Act 425 agreements thus allow
municipalities conditionally to revise their borders without
recourse to, or interference from, the Commission.

At issue is the Commission’s role in
determining whether an Act 425 agreement is valid for purposes of
deciding whether the agreement bars the Commission from
entertaining a petition for annexation concerning the same land.
The plain wording of MCL 124.29; MSA 5.4087(29), provides that
"a contract under this act" presently "in
effect" bars other forms of "annexation or
transfer" of the affected territory. This language expressly
requires an Act 425 agreement that is "in effect," and
therefore necessitates a valid agreement. Consequently, this
statutory bar to the Commission’s consideration of an
annexation petition requires an agreement that fulfills the
statutory criteria, rather than a fictional agreement intended
only to deprive the Commission of jurisdiction.

The townships argue that either the circuit
court should review the issue of jurisdiction de novo or that the
circuit court should have sole jurisdiction to determine the
validity of an Act 425 agreement. According to the townships, any
document purporting to be an Act 425 agreement, once signed and
filed according to the specified procedure, absolutely bars any
action concerning the same territory on the part of the
Commission, without regard to the substance of the agreement. We
disagree. In light of the broad grant of statutory authority to
the Commission over matters relating to the establishment of
boundaries and annexations, we hold that the Commission had the
authority and jurisdiction to decide the validity of the Act 425
agreements. Logic dictates that the Commission had the authority
to consider the validity of two agreements which, if valid, would
have barred its authority to process, approve, deny, or revise a
petition or resolution for annexation. The Commission would not
otherwise have been able to perform its function of resolving the
petition. See Shelby Charter Twp v State Boundary Comm,
425 Mich 50, 73-77; 387 NW2d 792 (1986) (the Commission may
proceed with an annexation petition where it has identified only
"pro forma" or "de minimus" exercises of
statutory measures that would otherwise supplant its
jurisdiction); Judges of the 74th Judicial Dist v Bay Co,
385 Mich 710, 728-729; 190 NW2d 219 (1971) (an administrative
agency is competent to determine its own jurisdiction). The
Commission’s determination was thereafter subject to review
in the circuit court. MCL 24.301; MSA 3.560(201); MCL 123.1018;
MSA 5.2242(18); Rudolph Steiner School of Ann Arbor v Ann
Arbor Charter Twp, 237 Mich App 721, 731; 605 NW2d 18 (1999).

IV. "Shark Repellent"

The second issue for our consideration is
whether the Commission erred in concluding that the underlying
agreement was illusory and therefore not valid. We review the
Commission’s findings for whether competent, material, and
substantial evidence existed to support the Commission’s
findings. See Midland Twp, supra at 672; MCL
24.306(1)(d); MSA 3.560(206)(1)(d).

Act 425 agreements are statutorily authorized
to allow local units to establish "an economic development
project," MCL 124.22; MSA 5.4087(22), which is statutorily
defined as follows:

"Economic development
project" means land and existing or planned
improvements suitable for use by an industrial or
commercial enterprise, or housing development, or the
protection of the environment, including, but not limited
to, groundwater or surface water. Economic development
project includes necessary buildings, improvements, or
structures suitable for an intended for or incidental to
use as an industrial or commercial enterprise or housing
development; and includes industrial park or industrial
site improvements and port improvements or housing
development incidental to an industrial or commercial
enterprise; and includes the machinery, furnishings, and
equipment necessary, suitable, intended for, or
incidental to a commercial, industrial, or residential
use in connection with the buildings or structures. [MCL
124.21; MSA 5.4087(21).]

The circuit court, in reviewing the
commission’s findings, noted that an advertisement
soliciting petition signatures in opposition to the annexation
contained the statement, "Help us in the preservation of
farmland and open space." The court continued:

MCL 124.21(a); MSA 5.4087(21)(a) . . .
requires that a valid Act 425 Agreement must provide for
improvements to the property necessary for the planned
industrial, commercial or housing development. The
. . . Commission requested information from the
townships by way of questionnaires regarding the
provision of water and sewer services. The Columbus
Township questionnaire indicated that 1) Columbus did not
provide public water service; 2) Columbus did not provide
sanitary sewer service, and 3) it could provide water
services by the "fall of 1997" and that
"Sewers [were] under study." The Casco Township
questionnaire answers stated that 1) Casco did not
provide public water services or sanitary sewer services,
2) public water services could be provided by the
"fall of 1997"; 3) Casco did not provide an
answer regarding when sanitary sewer services could be
provided. They apparently indicated that water would be
available to the Act 425 Agreement land, however, they do
not indicate when water could be available to the annexed
property. . . . Thus, the information presented to the
. . . Commission for industrial, commercial, or
industrial development may have been found to be more
illusory than genuine.

The . . . Commission further
determined that the Act 425 Agreements were simply
agreements to share services and not a true transfer of
property. The . . . Commission stated that
"the parties did not provide evidence of such
transfer, which minimally could have included a showing
of a transfer to Lenox Township of property tax records
and voting records of any residents in the Act 425
area."

The circuit court concluded that the townships
had not entered into any real plan for economic development. The
court further concluded that the purpose of the agreements was to
bind non-parties in derogation of their rights and the authority
of the Commission, and to "ward off any attempts by
municipalities to annex a portion of the Townships."

While the precise reasoning behind the
Commission’s disregard of the Act 425 agreements is not
entirely clear, it apparently concluded that the townships’
entered into the conditional transfers as an act of subterfuge
intended to preclude the Commission’s jurisdiction and avoid
future annexation. The circuit court, after reviewing the
administrative record, agreed with the Commission and dubbed the
Act 425 agreements "shark repellent."

The townships do not dispute the specific
factual findings underlying the Commission’s conclusions.
Rather, the townships argue that transfer of neither tax records
nor voting records is required for a valid transfer of land under
an Act 425 agreement. However, the Commission did not rule that
they were necessary, only that they were relevant considerations.
The townships also emphasize MCL 124.30; MSA 5.4087(30), which
provides that the filing of an Act 425 agreement constitutes
"prima facie evidence" of the existence of the
conditional transfer of land. The statute, however, does not
preclude a finding that the agreement was a sham. In our view,
the petitioners before the Commission developed a record that
supported the Commission’s conclusion that the agreements
were essentially an attempt to avoid annexation. Further, the Act
425 agreements themselves only vaguely contemplated a plan of
development at some point in the future. Based on the factors
discussed in Judge Kelly’s carefully considered opinion, we
conclude that competent, material, and substantial evidence
existed to support the Commission’s conclusion that the two
Act 425 agreements were illusory in nature and that the townships
entered into them in order to avoid future annexation.

V. Contract Rights

The townships’ final contention is that
the Commission’s decision interfered with their contract
rights in violation of US Const, art 1, § 10, and 1963
Const, art 1, § 10. "Vested rights acquired under
contract may not be destroyed by subsequent State legislation or
even by an amendment of the State Constitution." Campbell
v Judges’ Retirement Bd, 378 Mich 169, 180; 143 NW2d 755
(1966). This argument fails. No subsequent legislation or
constitutional amendment interfered with the townships’ Act
425 agreements.